Projected Costs of Generating Electricity – 2015 Edition

Executive summary 

Projected Costs of Generating Electricity – 2015 Edition is the eighth report in the series on the levelised costs of generating electricity. 

This report presents the results of work performed in 2014 and early 2015 to calculate the cost of generating electricity for both baseload electricity generated from fossil fuel thermal and nuclear power stations, and a range of renewable generation, including variable sources such as wind and solar. It is a forward-looking study, based on the expected cost of commissioning these plants in 2020. 

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The LCOE calculations are based on a levelised average lifetime cost approach, using the discounted cash flow (DCF) method. The calculations use a combination of generic, country-specific and technology-specific assumptions for the various technical and economic parameters, as agreed by the Expert Group on Projected Costs of Generating Electricity (EGC Expert Group). 

For the first time, the analysis was performed using three discount rates (3%, 7% and 10%).

1 Costs are calculated at the plant level (busbar), and therefore do not include transmission and distribution costs. Similarly, the LCOE calculation does not capture other systemic costs or externalities beyond CO2 emissions.

2 The analysis within this report is based on data for 181 plants in 22 countries (including 3 non-OECD countries3). This total includes 17 natural gas-fired generators (13 combined-cycle gas turbines [CCGTs] and 4 open-cycle gas turbines [OCGTs]), 14 coal plants,4 11 nuclear power plants, 38 solar photovoltaic (PV) plants (12 residential scale, 14 commercial scale, and 12 large, groundmounted) and 4 solar thermal (CSP) plants, 21 onshore wind plants, 12 offshore wind plants, 28 hydro plants, 6 geothermal, 11 biomass and biogas plants and 19 combined heat and power (CHP) plants of varying types. This data set contains a marked shift in favour of renewables compared to the prior reports, indicating an increased interest in low-carbon technologies on the part of the participating governments. 

Part II of the study contains statistical analysis of the underlying data (including a focused analysis on the cost of renewables) and a sensitivity analysis. Part III contains discussions of “boundary issues” that do not necessarily enter into the calculation of LCOEs, but have an impact on decision making in the electricity sector. The chapter on financing focuses on issues affecting the cost of capital, a key topic given the trends noted above. The chapter on emerging generating technologies provides a glimpse of what the next study may include, as these emerging technologies are commercialised. The final two chapters present cost issues from a system perspective and cost metrics that may, in addition to LCOE, provide deeper insight into the true cost of technologies in liberalised markets with high penetrations of variable renewable power.

Results

Figure ES.1 shows the range of LCOE results for the three baseload technologies analysed in this

report (natural gas-fired CCGTs, coal and nuclear). At a 3% discount rate, nuclear is the lowest cost

option for all countries. However, consistent with the fact that nuclear technologies are capital

intensive relative to natural gas or coal, the cost of nuclear rises relatively quickly as the discount

rate is raised. As a result, at a 7% discount rate the median value of nuclear is close to the median

value for coal, and at a 10% discount rate the median value for nuclear is higher than that of either

CCGTs or coal. These results include a carbon cost of USD 30/tonne, as well as regional variations in

assumed fuel costs

Figure ES.1: LCOE ranges for baseload technologies (at each discount rate)

https://www.iea.org/Textbase/npsum/ElecCost2015SUM.pdf

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